How to Read and Use the Forex Economic Calendar

How to Read and Use the Forex Economic Calendar

Reading time: 7 minutes

An economic calendar informs traders, investors and economists about the well-being of a country’s economic landscape. Its job is to catalogue scheduled economic data in relation to the economy and financial markets. Do note that you will hear some analysts refer to economic data as ‘risk events’. Either way, they mean the same thing – it’s data for a particular country, for a specific economic indicator at a specific time and date. 

The foreign exchange market (Forex market) is a dynamic marketplace that operates 24 hours a day, five days a week. For traders and investors attempting to navigate this ever-changing space, the economic calendar is an indispensable tool. 

Currencies, formed as ‘currency pairs’, are influenced by a constant stream of scheduled economic data and central bank policy meetings and speeches. 

Reading the Forex Economic Calendar

The economic calendar provided by Forex Factory is one of the most popular economic calendars used among retail traders and investors. As you can see from above, the calendar is presented in tabular format, broken down into clear groups consisting of the following components:

Date and Time:

These sections detail the time and date of each economic data release. Most economic calendars allow you to adjust the timing to suit your time zone; you can often also filter by Date range and Impact.

Currency:

This section presents the currency that is likely to be most influenced by the economic data.

Impact:

Many economic calendars categorise economic data into three groups: low impact (yellow), medium impact (orange), and high impact (red). Events projected to increase market volatility tend to be assigned a high-impact label, while others that regularly fail to move the market’s dial will be organised as medium or even low-impacting.

Event (News Releases):

This is where you will find the name of the economic data being released. Major economic data released monthly include employment indicators (think Non-Farm Payrolls data from the US), GDP (Gross Domestic Product) and inflation data, such as CPI (Consumer Price Index) and PPI (Producer Price Index) inflation. 

Most economic data are also labelled according to how they are calculated; they could be measured annually, for example, comparing the current month (assuming it is a monthly frequency) against that same month a year prior (usually marked Y/Y on the calendar). The other main ones you will see are Q/Q and M/M figures. Q/Q represents current quarterly data compared with the previous quarter, and M/M represents monthly values compared with the previous month. 

Detail:

By clicking on the ‘Detail’ tab, you will have access to historical data for the event, related news stories, and specifics about the event, such as its source, what the economic data measures and the frequency of the release. 

Actual; Forecast; Previous:

The ‘Actual’ value is the report’s outcome. So once the data is released, the Actual column will be populated with the reported figures. ‘Forecast’ refers to the consensus estimates derived from polling economists before the event’s release date, while ‘Previous’ displays data from the previous event. 

Forex Economic Calendar: How is it used?

The most important variables for traders are the Actual data and the Forecasts. The Actual data is only viewable after the data has been released, while the Forecast, which is usually the median estimate of polled economists, is displayed ahead of the event (do note that this median estimate may change the closer we get to the scheduled release date as more economists submit their predictions to the poll). Also noteworthy is that some premium economic calendars provide an estimate range of high and low values, together with average values.

One of the most popular ways in which professional Forex traders use the economic calendar is to compare Actual and Forecast values. They use the calendar to first identify a baseline – the market’s expectation of a specific event – and then, should the Actual data report higher or lower than the expectation, this can see increased volatility across the currency markets and create trading opportunities. For example, below is the economic calendar for 22 May 2024. UK CPI inflation reported higher than expected numbers. For the headline UK CPI release (Y/Y), the expectation was for inflation to slow to a rise of 2.1% in the twelve months to April 2024, but we saw a rise of 2.3%. This sent the GBP higher against many of its major G10 counterparts. To trade this event, traders would usually either look to enter the market as quickly as possible or use technical analysis to garner entry and exit points a few minutes after the release (the latter can be favoured in many cases in order to limit slippage). 

Another common way traders use the economic calendar is simply to help highlight when high-impacting events are scheduled in order to manage active positions and potential trading opportunities. This is usually used by technical analysts who do not incorporate any macroeconomic analysis (or fundamental analysis) into the trading decisions.

Economic Calendar FAQs

1. What is an economic calendar?

An economic calendar lists scheduled economic data and central bank events.

2. How can I read an economic calendar?

Most economic calendars are presented using a similar format, with all the components categorised accordingly. Therefore, using the information in this article, you should now be able to read what most economic calendars are displaying. 

3. How do professional traders use economic calendars? 

Economic calendars can be used in several ways. One way is to compare Actual versus Forecast values and trade accordingly. Technical analysts also regularly use economic calendars to help highlight potentially high-impacting economic events that could affect active positions or may influence a trade that is about to be opened.